The US economic recovery is well on its way as the third-quarter GDP growth hit 33.1%, which beat the estimates. The increase comes on the back of historical decreases, but it’s a positive note. European governments have started to reinstate lockdowns to combat the spread of the virus. Reinstating the lockdowns caused the German DAX to sell off 4.2% and the French FCHI index to drop 3.4% yesterday. The US has three consecutive days of record daily increases, and the markets are worried the US will follow the EU’s lead and reinstitute lockdowns. This caused the markets to sell off yesterday, with the S&P 500 dropping 119.65 points or 3.53%. Can small businesses that have spent money, time and emotional energy to reopen sustain another closure? Many will not.
China appears to be the only country that has the virus under control. China is a one-party authoritarian state that is ruled by the communist party. They have enacted severe but effective measures to keep the virus at bay.
As many of you know, I went to the University of Wuhan for a year after graduating from college. One of my friends who still lives there went to visit his wife’s family in the Philippines before the outbreak. China did not allow him to return home for 271 days as it locked down the country to control the spread. To get home, he was required to take both a swab test and a serum test 4 hours before boarding the airplane in the Philippines. After finally arriving back home in Wuhan, he had to quarantine himself for two weeks. Below are a couple photos of his journey.
I don’t know if western democracies are willing and able to endure this type of lockdown. For now, the Chinese have been successful in controlling the spread. Can they maintain this discipline long enough for an effective vaccine to be made? Or is the virus’s long-game going to win?
ETF of the Week: iShares Emerging Market (EEM)
iShares Emerging Market ETF (+1.43%) was the best performer this week. This index is market-cap-weighted, and larger companies have greater weighting. The top 5 markets China, Taiwan, South Korea, India, and Brazil make up 71% of the holdings.